US and Chinese tariffs hurting companies operating in China: AmCham survey

SINGAPORE (May 22): The increases in US and Chinese tariffs are having a negative impact on their businesses, according to 74.9% of respondents in a recent survey by AmCham China and AmCham Shanghai of its member companies.

This negative impact was higher for manufacturers at 81.5% for US tariffs and 85.2% for Chinese tariffs and felt through lower demand for products (52.1%), higher manufacturing costs (42.4%), and higher sales prices for products (38.2%).

The joint survey by AmCham China and AmCham Shanghai from May 16-20 to assess the impact of the increase in US and Chinese tariffs on member companies operating in China received nearly 250 responses, with 61.6% manufacturing-related companies, 25.5% from services, 3.8% from retail and distribution, and 9.6% from other industries.

To cope with the tariffs, the survey also found that companies are increasingly adopting an “In China, for China” strategy (35.3%), or delaying and canceling investment decisions (33.2%).

The “In China, for China” is a strategy of localising manufacturing and sourcing within China to mainly serve the China market. This allows many companies to insulate themselves from the effects of tariffs while maintaining their ability to pursue domestic market opportunities.

While over half of respondents (53.1%) have not seen any increase in non-tariff retaliatory measures by the Chinese government, roughly one in five have experienced increased inspections (20.1%) and slower customs clearance (19.7%).

Members also experienced slower approval for licenses or other applications (14.2%) and other complications from more intense bureaucratic oversight or regulatory scrutiny (14.2%).

Approximately 40.7% of respondents are considering or have relocated manufacturing facilities outside China.

For those moving manufacturing out of China, Southeast Asia (24.7%) and Mexico (10.5%) are the top destinations. Fewer than 6% of members said they have or are considering relocation of manufacturing to the US.

If no agreement to resolve the trade frictions is reached within the next two months, members are most concerned about a deterioration of the bilateral relationship (52.7%).

As a reflection of this sentiment, 42.7% of members supported a return to the status quo, showing that members want a deal and a return to the pre-tariff predictability and stability of the US-China trade relationship.

At the same time, this would suggest that 53.3% of members favour negotiations continuing towards a deal that addresses structural issues allowing them to operate on a more level playing field.

Additionally, members are also concerned about an increase in operating costs (45.6%) and being forced to find alternative sources for items currently produced in either the US (22.2%) or China (22.2%).